Michelle Singletary: On College Decision Day, Don’t Sentence Your Child To Decades Of Debt
In a way, it’s fitting that May 1 is the day that many colleges require students to make up their minds and send in a deposit to secure their place in the fall freshman class.
This reminds me of the term “Mayday”, an internationally recognized radio distress signal used by aircraft and ships. Four, five and more likely six years from now, parents and graduate students will be crying out for help after realizing that the amount of student debt they have incurred will create financial distress for decades.
Hear and learn from the regrets of borrowers pleading with President Biden for widespread student loan forgiveness. Read the stories of people complaining that their student debt is threatening their retirement security.
My husband and I have been where you are now. We faced the college selection deadline – three times. We told our three kids they could apply to any college they wanted. But, we held firmly to one rule: no debt, no matter what.
For about 20 years, we saved in 529 plans for each of our children. Because our eldest received a scholarship for her undergraduate studies, we had enough money to pay cash for her master’s degree. Our son took five years to complete his math degree. He was only offered federal loans, which we declined. Our youngest will be graduating from Towson University this spring. We paid for her first year and she received a full ride for the remaining three years. She will step into her future as a teacher without a student loan.
Providence, prudence and planning helped us get them out of college debt free.
Still, I understand. You may think you have no choice but to borrow. You yearn for prosperity for your children, and debt is the price you and they are willing to pay. However, if you want to avoid a Mayday signal of financial distress in the years to come, here are some things to consider when weighing your child’s college choices and the prospect of using a lot of debt to help them earn a degree.
• Don’t leave the decision to an 18 year old. I have heard so many parents say that the choice of university depends on their child.
The protests go something like this: “What can we do if this is where he wants to go? or “We can’t disappoint our child. She worked so hard.
You have a choice if they need you for loans. You can say, “No, we can’t pay for that particular school.
When it comes to choosing a college, too often the desire of the student trumps financial common sense to choose a school that does not require the accumulation of debt that will take decades to pay off.
• Don’t let the possibility of borrowing a lot of money dictate your decision. Lenders and the federal government make it too easy to overspend on a college education. Look at the cost of room and board this way. Outside of college, would you think it was reasonable to take multiple loans over four to six years to pay for rent and food?
Even if you think debt is necessary, limit borrowing to what is absolutely necessary. This may mean your child is commuting or starting at community college.
• Don’t ignore the long-term burden of student loan debt on your monthly budget. The problem with student loans is that the monthly payments don’t start impacting your budget until a later date. This makes it difficult for students to realize how painful the payments will be once they graduate – or drop out without a degree.
Even with income-based repayment plans that can lower the monthly cost, borrowers still lament having to manage student loans with all the other monthly obligations that come with living alone.
• Don’t assume you’re only in financial trouble for four years. Perhaps you plan to only take out loans for four years. But consider this: The national six-year completion rate for students who started college in the fall of 2015 was 62.2%, according to a report by the National Student Clearinghouse Research Center. Completion rates consider all students enrolled full-time or part-time in two- or four-year institutions and include transfer students.
• Don’t believe the hype that college matters most. Put college choice into perspective. A prestigious public or private institution with a high price does not guarantee better job opportunities or crucial professional relationships.
Yes, there are some companies or recruiters who pretentiously recruit from prestigious schools. But that alone is no reason to take out unmanageable student loans. There will be other jobs.
Think about your workplace. Maybe you went to college, maybe not. Your colleagues, assuming they did, are likely graduates of various institutions of higher education, from community colleges to Ivy League universities.
• Don’t forget to plan for the cost of higher education. If your child is studying in a field where a graduate degree may be necessary for career advancement, don’t go into too much debt for their undergraduate education.
• Don’t accept that student loans are “good debt”. The average student loan amount is just under $30,000. But this statistic leaves out many people who are living a student loan repayment nightmare. In March 2021, around 1 in 5 borrowers were in default.
I have a reading assignment for you. Go to pewtrusts.org and read: “Borrowers Discuss Student Loan Repayment Challenges”.
While focus group participants expressed gratitude for going to college, they also shared their frustrations with paying off their student loans because — guess what — life got in the way.
Their best-laid plans for managing payments were interrupted by revenue volatility and financial shocks, Pew found.
“If your car breaks down and it needs to be fixed, will you get your car fixed or will you do your student loan?” said a Detroit borrower.
Besides buying a house, this is probably the most important financial decision you and your child will make. Avoid a debt trap that will leave you screaming “Mayday” long after your child graduates.